nutrien q1 2020 results presentation...•nutrien announced a net loss of $35 million ($0.061...
TRANSCRIPT
May 6, 2020
Nutrien Q1 2020
Results Presentation
Forward Looking Statements
Certain statements and other information included in this document, including within “Outlook and Guidance” constitute "forward-looking information" or "forward-looking statements"
(collectively, "forward-looking statements") under applicable securities laws (such statements are often accompanied by words such as "anticipate", “forecast”, "expect", "believe", "may", "will",
"should", "estimate", "intend" or other similar words). All statements in this document, other than those relating to historical information or current conditions, are forward-looking statements,
including, but not limited to: our 2020 annual and first half guidance, including expectations regarding our adjusted net earnings per share, adjusted EBITDA and EBITDA by segment;
expectations regarding performance of our operating segments in 2020; our operating segment market outlooks and market conditions for 2020, and the impact of the novel coronavirus disease
(COVID-19). These forward-looking statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond our control, which could cause actual results to differ
materially from such forward-looking statements. As such, undue reliance should not be placed on these forward-looking statements.
All of the forward-looking statements are qualified by the assumptions that are stated or inherent in such forward-looking statements, including the assumptions referred to below and elsewhere
in this document. Although we believe that these assumptions are reasonable, this list is not exhaustive of the factors that may affect any of the forward-looking statements and the reader
should not place an undue reliance on these assumptions and such forward-looking statements. The additional key assumptions that have been made include, among other things, assumptions
with respect to our ability to successfully complete, integrate and realize the anticipated benefits of our already completed and future acquisitions, and that we will be able to implement our
standards, controls, procedures and policies at any acquired businesses to realize the expected synergies; that future business, regulatory and industry conditions will be within the parameters
expected by us, including with respect to prices, margins, demand, supply, product availability, supplier agreements, availability and cost of labor and interest, exchange and effective tax rates;
the completion of our expansion projects on schedule, as planned and on budget; assumptions with respect to global economic conditions and the accuracy of our market outlook expectations
for 2020 and in the future; our expectations regarding the impacts, direct and indirect, of COVID-19 on our business, customers, business partners, employees, supply chain, other stakeholders
and the overall economy; the adequacy of our cash generated from operations and our ability to access our credit facilities or capital markets for additional sources of financing; our ability to
identify suitable candidates for acquisitions and divestitures and negotiate acceptable terms; our ability to maintain investment grade ratings and achieve our performance targets; and the
receipt, on time, of all necessary permits, utilities and project approvals with respect to our expansion projects and that we will have the resources necessary to meet the projects’ approach.
Events or circumstances that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: general global economic, market and
business conditions; failure to complete announced and future acquisitions or divestitures at all or on the expected terms and within the expected timeline; climate change and weather
conditions, including impacts from regional flooding and/or drought conditions; crop planted acreage, yield and prices; the supply and demand and price levels for our products; governmental
and regulatory requirements and actions by governmental authorities, including changes in government policy (including tariffs, trade restrictions and climate change initiatives), government
ownership requirements, changes in environmental, tax and other laws or regulations and the interpretation thereof; political risks, including civil unrest, actions by armed groups or conflict and
malicious acts including terrorism; the occurrence of a major environmental or safety incident; innovation and cybersecurity risks to our systems, including our costs of addressing or mitigating
such risks; regional natural gas supply restrictions; counterparty and sovereign risk; delays in completion of turnarounds at our major facilities; gas supply interruptions; any significant
impairment of the carrying value of certain assets; risks related to reputational loss; certain complications that may arise in our mining processes; the ability to attract, engage and retain skilled
employees and strikes or other forms of work stoppages; the COVID-19 pandemic and resulting effects on business and economic conditions; and other risk factors detailed from time to time in
Nutrien reports, including our 2019 annual report dated February 19, 2020, our annual information form dated February 19, 2020 for the year ended December 31, 2019 and our first quarter
2020 interim report dated May 6, 2020, filed with the Canadian securities regulators and the Securities and Exchange Commission in the United States.
The purpose of our expected adjusted net earnings per share (full year and first-half 2020), adjusted EBITDA and EBITDA by segment guidance ranges are to assist readers in understanding
our expected and targeted financial results, and this information may not be appropriate for other purposes.
Nutrien disclaims any intention or obligation to update or revise any forward-looking statements in this document as a result of new information or future events, except as may be required
under applicable Canadian securities legislation or applicable US federal securities laws.
Non-IFRS Financial Measures Advisory
We consider EBITDA, adjusted EBITDA, Corporate and Others adjusted EBITDA, adjusted net earnings (loss) per share, adjusted net earnings per share and adjusted EBITDA guidance,
Potash cash cost of product manufactured (COPM) and Ammonia controllable cash COPM, all of which are non-IFRS financial measures, to provide useful information to both management and
investors in measuring our financial performance and financial condition. Refer to the disclosure under the heading “Appendix B – Non-IFRS Financial Measures” included in our news release
dated May 6, 2020 announcing our first quarter 2020 results, as filed on SEDAR at www.sedar.com and EDGAR at www.sec.gov under our corporate profile, for a reconciliation of these non-
IFRS financial measures to the most directly comparable measures calculated in accordance with IFRS and for a further discussion of how these measures are calculated and their usefulness
to users, including management. Non-IFRS financial measures are not recognized measures under IFRS and our method of calculation may not be comparable to that of other companies.
These non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS.
2
Note: All dollar amounts are stated in US dollars throughout the presentation unless otherwise noted.May 6, 2020
May 6, 2020
First Quarter 2020 Results
• Nutrien announced a net loss of $35 million ($0.061 diluted net loss per share) in Q1 2020. First-quarter
adjusted net loss was $0.12 per share and adjusted EBITDA was $508 million.
• COVID-19 has had limited direct impact on Nutrien’s operations or crop input demand, and the company
remains in an excellent financial position with a strong balance sheet and free cash flow, a stable dividend and
ample liquidity.
• Retail Q1 EBITDA increased by $33 million quarter-over-quarter due primarily to stronger results in the US and
Australia. Stronger sales and stable-to-improving margins in the three largest sales categories were supported
by improved application conditions and the acquisition of Ruralco. There was significant year-over-year adoption
and use of our digital platform, providing a safe and efficient conduit for our agronomists and customers to
conduct business.
• Potash EBITDA was lower compared to 2019 due to lower net realized selling prices. Volumes were similar as a
reduction in offshore sales volumes was largely offset by higher North American sales volumes.
• Nitrogen EBITDA decreased in Q1 2020 due to lower net realized selling prices which more than offset higher
sales volumes and lower per tonne costs.
• Nutrien declared its second quarterly dividend in 2020 maintaining a payout rate of $0.45 per share ($1.80
annualized). We expect this to be in line with our target of returning 40-60 percent of annual free cash flow.
• Nutrien enhanced its liquidity position by increasing short-term debt facilities and drawing upon available credit
lines to bolster its cash position, providing additional resources in times of increased market volatility.
• Nutrien full-year 2020 adjusted net earnings per share and adjusted EBITDA guidance was lowered to $1.50 to
$2.10 per share and $3.5 billion to $3.9 billion, respectively. First-half 2020 guidance is provided at $1.20 to
$1.40 adjusted net earnings per share.
1. All references to per-share amounts pertain to diluted net earnings/loss per share.
Q1 2020 Financial and Strategic Highlights
May 6, 2020
4
1-$26
$7
$461
$285 $274$236
$68 $46
-$73 -$66
$704
$508
Nutrien Q1 2020: Adjusted EBITDA1 Comparison 5
10%
-38%
-14%
-32%
-28%
Adjusted EBITDA decreased primarily due to lower prices across fertilizer product categories.
Retail EBITDA increased due to stronger sales and stable-to-improving margins in the three
largest sales categories.
Consolidated
Segment EBITDA and Adjusted EBITDA (US$ Millions)
Q1 2019 Q1 2020
Retail Potash Nitrogen Phosphate Corp, Other, &
Elim
1. Adjustments to EBITDA are exclusively captured in Corporate and Others. In Q4 2019, we amended our calculations to exclude the impact of certain foreign
exchange gain/loss (net of related derivatives). We restated the comparative period to reflect this change resulting in an increase of $7 in Corporate and Others
adjusted EBITDA.
May 6, 2020
Source: Nutrien
1
Retail: Q1 2020 Gross Margin Bridge
Higher gross margin due to stronger sales and stable-to-improving margins in the three
largest sales categories. Results were supported by organic and acquisition growth and solid
contributions from our proprietary products lines.
6
May 6, 2020
US$ Millions
Source: Nutrien
$529
$409
$252
$425
Q1'19Gross Margin
Net Selling Price Volumes COGSexcl. D&A
D&A inCOGS
Q1'20Gross Margin
1
Potash: Q1 2020 Gross Margin Bridge
Lower benchmark prices impacted potash margins
7
May 6, 2020
US$ Millions
1. COGS variance does not include depreciation and amortization (D&A).
Source: Nutrien
Potash: Lower EBITDA on lower net realized prices and offshore volumes, offset by higher North American volumes. 8
Potash EBITDA US$ Millions
1.0 1.2
1.9 1.7
Q1’19 Q1’20
2.9 2.9
Q1’19 Q1’20
$180$238
-24%
Q1’20
$60
Q1’19
$58
+3%
Sales VolumesMillion Tonnes
Net Selling PriceUS$/MT
$461
$285
Q1’19 Q1’20
-38%
Cash Cost of
Product
ManufacturedUS$/MT
Source: Nutrien
May 6, 2020
Offshore
N. America
$97
$166
Q1'19Gross Margin
Net Selling Price Volumes Other Nitrogen andPurchased Product
COGSexcl. D&A
D&A inCOGS
Q1'20Gross Margin
-$7
1
Nitrogen: Q1 2020 Gross Margin Bridge
Nitrogen results impacted primarily by lower global
and North American nitrogen benchmark prices
9
May 6, 2020
US$ Millions
Source: Nutrien
1. COGS variance does not include depreciation and amortization (D&A).
10
Nitrogen EBITDA US$ Millions
Q1’19 Q1’20
93% 91%
-2%
$244
Q1’19 Q1’20
$210
-14%
$47
Q1’20Q1’19
$43
+9%
Ammonia
Operating Rate1
Percent
Net Selling
PriceUS$/MT
Ammonia
Controllable Cash
Cost of Product
ManufacturedUS$/MT
Q1’19 Q1’20
$236
$274
-14%
1. Excludes Joffre and Trinidad.
Nitrogen: EBITDA Impacted by Lower Prices
Source: Nutrien
May 6, 2020
-$7
$14
Q1'19Gross Margin
Net Selling Price Volumes COGSexcl. D&A
D&A inCOGS
Q1'20Gross Margin
1
Phosphate: Q1 2020 Gross Margin Bridge
US$ Millions
1. COGS variance does not include depreciation and amortization (D&A).
11
May 6, 2020
Source: Nutrien
Lower global benchmark pricing impacted margins but was partially
offset by lower raw material costs
Year
Declared
Apr'18 Jul'18 Oct'18 Jan'19 Apr'19 Jul'19 Oct'19 Jan'20 Apr'20 Jul'20
$0.40
$0.43$0.45
Share Repurchases Dividends Paid
Commitment to a stable and growing dividend, with a current yield of over 5%1
Returns to Shareholders Through Dividends and Share Repurchases
Dividends Paid and Share RepurchasesUS$ Billions
12
May 6, 2020
Source: Nutrien
LTM2 Q1’20
$2.31
1. Dividend yield calculated as dividend per share ($1.80/sh annualized) divided by the closing share price on the NYSE as at May 4, 2020.
2. Last twelve months.
3. Dividend declared on May 6, 2020, payable on July 17, 2020 to shareholders of record June 30, 2020.
Dividends PaidUS$/Share
$1.29
$1.02
2018 2019 2020
3
$36
Q1'19 2019 Quarterly Avg. Q1'20
$3
$171
$65
13Nutrien Ag Solutions Digital Platform
May 6, 2020
Source: Nutrien
Proportion of Digital Platform Sales1,4
Percent
1%
11%
40%
Q1'19 2019 Q1'20
Digital Platform Sales 1
US$ Millions
1. Q1’19 and 2019 represents North America results. Q1’20 represents US results.
2. Refers to US seed sales ordered on the digital platform. This feature was added in Q1’20 and is not incorporated in the percent of sales for comparability purposes.
3. The launch of the platform was in March 2019.
4. North American digital Retail sales as a proportion of North American Retail sales that are available for purchase online.
Exceptional adoption of our full-service digital platform
$207
3 3
2
Nutrien Ag Solutions Digital Platform:“Progress Update and Future Plans”
14
Crop Planning ToolAbility to place digital orders directly from the
plan
Nutrien FinancialSeamlessly apply for financing/credit for
purchases from Nutrien Ag Solutions
Field-specific Seed
Recommendation ToolField by field multi-brand seed selling
solution
Fertility Management ToolSoil and tissue data driven fertility insights
International ExpansionPlanning phase underway to roll out platform
in Australia and South America
May 6, 2020
Source: Nutrien
✓ Purchasing of key crop protection, fertilizer
and seed products, order online or have your
agronomist do it on your behalf
✓ Pay bills online, look up past purchases, see
account balances, notifications of new statements
✓ Farm insight app current spray conditions,
radar for rain & temp, last 24 hours of rainfall, and
national rainfall layers
✓ Sustainability calculator and reporting linked
to applied inputs and agronomic practices
✓ Digital crop plans created tailor-made with
your agronomist
Current Functionality Planned Additions for 2020
Outlook and Guidance
May 6, 2020
Grower Margins Have Declined, but Fertilizer Prices Remain Affordable
Source: USDA, IMEA, Doane, Nutrien
16
-100
-50
0
50
100
150
200
250
300
-550
-250
50
350
650
950
1,250
1,550
1,850US Corn
Key Crop Grower Cash MarginsLocal Currency Margin/Acre
Prospective US grower margins have been pressured by reduced crop futures;
however, relatively favorable S/D balances and FX weakness have supported
non-US production economics
US Soybean US Wheat US Cotton CDN Canola Brazil Soybean
May 6, 2020
Expected Impact: If there are corn production
issues in 2020 or soybean problems in 2021 it
could be an opportunity for the US
Expected Impact: Another increase in soybean
acreage and high input demand in 2H 2020
Record high grower margins could be realized in the
current crop year at current prices and growers are able
to lock in profitable prices for 2021
Record high grower margins could be realized in the
current crop year at current prices and growers are able
to lock in profitable prices for 2021
Brazilian Grower Fundamentals are Strong 17
0
400
800
1,200
1,600
2,000
2011 2012 2013 2014 2015 2016 2017 2018 2019F2020F
Mato Grosso Cash Soybean MarginsReal/hectare
0
20
40
60
80
100
Soybeans
Corn
Mato Grosso Cash Soybean & Corn PricesReal/Sack
Increased Brazilian currency depreciation vs. the USD could lead to record high grower
margins and another increase in soybean acreage in 2H 2020
May 6, 2020
Source: USDA, Bloomberg, CONAB, Nutrien
Australia has Received Much Needed Moisture 18
(Key growing regions circled in red)
South East Australia, a key growing region, has received above average precipitation
which are improving soil conditions
May 6, 2020
Source: Australia Bureau of Meteorology
US Corn & Soybean Planting Progress 19
Corn Planting Progress% of planting completed
Soybean Planting Progress% of planting completed
0
10
20
30
40
50
60
70
80
90
100
5-Apr 12-Apr 19-Apr 26-Apr 3-May 10-May 17-May 24-May 31-May
2018 2019 2020 10 Year Avg
0
10
20
30
40
50
60
70
80
90
100
19-Apr 26-Apr 3-May 10-May 17-May 24-May 31-May 7-Jun
2018 2019 2020 10 Year Avg
US planting pace is significantly improved from historically low 2019 levels, but started
slow in the southern growing regions
Source: USDA, Nutrien
May 6, 2020
North American Major Crop Acreage Forecast
2013 2014 2015 2016 2017 2018 20192020F
(USDA)
2020F
(NTR)
Corn 95.3 90.6 88.4 94.0 90.2 89.9 89.7 97.0 94-96
Soybeans 76.5 83.7 83.2 83.4 90.1 89.2 76.1 83.5 85-87
Wheat 56.2 56.8 54.6 50.2 46.4 47.8 45.2 44.7 45.0
Cotton 10.3 11.0 8.6 10.1 12.6 14.1 13.7 13.7 12.5
Sorghum 8.1 7.2 8.7 6.7 5.6 5.7 5.3 5.8 6.0
Rice 2.5 2.9 2.6 3.2 2.5 3.0 2.5 2.8 2.8
Total US
Major249 252 246 248 247 250 233 248 248
WC1 Canola 20.1 20.7 20.6 20.6 22.8 22.6 21.0 21.0
20
Million Acres
Compared to USDA forecasts, we expect lower corn and cotton acreage,
and higher soybean acreage
Source: USDA, Informa, Nutrien
May 6, 20201. Western Canada
Million Tonnes KCl
2020
Fo
recast
21
We project improved global potash demand of 65 to 67 million tonnes in 2020,
up from ~64 million tonnes in 2019
Global Potash Deliveries by Region
Source: CRU, Fertecon, IFA, Nutrien
May 6, 2020
0
5
10
15
20
16 17 18 19 20F 16 17 18 19 20F 16 17 18 19 20F 16 17 18 19 20F 16 17 18 19 20F 16 17 18 19 20F
India Other Asia North America Latin America China Other
4.0 – 4.5Mmt
• Expect increased
shipments supported
by normal monsoon
rains in 2020 and
increased minimum
support prices and
production for key
crops
8.5 – 10.0Mmt
• Despite volatile palm
oil prices, we expect
improved affordability
and supportive prices
for a wide range of
other crops, such as
rice to support
increased demand
9.5 – 10.0Mmt
• Rebound in corn and
soybean acreage
combined with more
normal application
weather expected to
support a rebound in
potash consumption
13.0 – 14.0Mmt
• Strong corn and
soybean fundamentals
and record-high
grower margins,
combined with lower
inland potash
inventory, expected to
support demand
14.5 – 15.5Mmt
• Expect reduced
shipments driven by
inventory build in 2019,
while domestic
consumption remains
supported by tightened
crop supplies and
government subsidies
13.5 – 14.0Mmt
• Improved affordability
and growing demand
for NPK fertilizers,
particularly in Africa
and FSU countries, are
expected to boost
potash demand
Global Potash Producer Sales
Source: CRU, Fertecon, Company Reports, Nutrien
Global Potash Producer Shipment Changes(Million Tonnes KCl)
0.8
0.4
0.8
0.2
66.0
2019
Shipments
Nutrien Other
North American
Producers
Former
Soviet Union
Producers
Rest of the
World
2020F
Shipments
63.8
22
May 6, 2020
Nutrien well-positioned to meet an increase in global potash demand
13.8Mmt
8.9Mmt
4.7Mmt
2.5Mmt
4.9Mmt 4.0-5.0Mmt
$0
$50
$100
$150
$200
$250
$300
$350
2015 2016 2017 2018 2019 2020F
Urea Exports Anthracite Coal based Production
Bituminous Coal based Production Urea Price (fob China)
Improved operating rates, increased
production and higher exports in 2019
23
Slow start to 2020 export, but expect increased Chinese operating rates and strong
global demand to support urea exports the remainder of the year
Chinese Urea Exports Respond to Market Signal
Chinese Urea FundamentalsPrice/Cost (US$/tonne)
Source: CRU, Nutrien
Poor margins, low
operating rates and
closures
May 6, 2020
1
1
1. Represents the estimated production cost of Chinese urea producers using Bituminous and Anthracite feedstocks.
250
200
100
50
0
300
350
150
Lower Energy Prices Pressure Nitrogen Prices 24
Global Urea Cost CurveUS$/tonne
Global Export Ammonia Cost CurveUS$/tonne
Lower European gas costs and
Russian FX rate pressures NH3 cost
Current coal prices remain at 2019 lows,
but prices have been stable in 2020
May 6, 2020
Source: CRU, Fertecon, Nutrien
Global natural gas prices remain under pressure due to high LNG supply;
Low crude oil prices likely limit upside, but not as impactful as they were historically
Operational Capability (Mmt) Operational Capability (Mmt)
2020 2019 2018
150 20105 20
50
200
0 140
100
120
0
300
250
10060 80 180
150
350
16040
Nutrien 2020 Annual Guidance
2020 Guidance Ranges 1
(annual guidance except where noted) Low High
Adjusted net earnings per share 1 $1.50 $2.10
Adjusted EBITDA (billions) $3.5 $3.9
Retail EBITDA (billions) $1.4 $1.5
Potash EBITDA (billions) $1.0 $1.2
Nitrogen EBITDA (billions) $1.1 $1.3
Phosphate EBITDA (millions) $150 $200
Potash sales tonnes (millions) 2 12.1 12.5
Nitrogen sales tonnes (millions) 2 10.9 11.5
Depreciation & amortization (billions) $1.8 $1.9
Effective tax rate 22% 24%
Sustaining capital expenditures (billions) $0.9 $1.0
1. All references to per-share amounts pertain to diluted net earnings per share.
2. Potash and nitrogen sales tonnes include manufactured product only. Nitrogen sales tonnes exclude ESN® and Rainbow products.
25
May 6, 2020
(Refer to page 46 of Nutrien’s 2019 Annual Report for related sensitivities)
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